March 05, 1984


You request a ruling as to the application of the sales tax to the sales of propane gas by your client, a welding company ("Company").

The Company is principally a welding business, but it also has on its premises two five-hundred gallon tanks filled with propane gas from which it makes sales to the public. The customers buy the propane gas for three purposes: to operate gas grills to use in roofing and welding, and to operate forklift trucks. The Company refills tanks that customers bring in.

Propane gas is taxed under Chapter 64E of the General Laws if the propane is used or sold to propel motor vehicles registered for use on the public highways. (G.L. c. 64E, § 1(c)). Sales of propane gas for other uses are taxable under Chapter 64H, unless the propane is sold for use in an exempt activity. (G.L. c. 64H, § 2).

Chapter 64H, Section 6(f) exempts from the sales tax sales of building materials or supplies to be used in the construction, reconstruction, alteration, remodeling, or repair of any building or structure owned by a governmental body or agency or by a corporation, foundation, organization, or institution exempt from taxation under Section 501(c)(3) of the Internal Revenue Code. To qualify for the exemption, the governmental body or the tax-exempt organization must have first obtained from the Commissioner a certificate of exemption, and the vendor must keep a record of the sales price of each such separate sale, the name of the purchaser, the date of each such separate sale, and the number of such certificate.

Chapter 64H, Section 6(r) exempts from the sales tax sales of fuels which are consumed and used directly and exclusively in a industrial plant in the actual manufacture of tangible personal property to be sold. An industrial plant is defined as a factory at a fixed location primarily engaged in the manufacture, conversion, or processing of tangible personal property to be sold in the regular course of business.

Tangible personal property purchased for resale but used instead by the purchaser is subject to the sales tax. The amount subject to the sales tax is the cost of the tangible personal property used by the purchaser. (G.L. c. 64H, § 8(d)).

Based on the foregoing, it is ruled that:

1. Sales of propane gas to operate gas grills are subject to the sales tax.

2. Sales of propane to roofers and welders are subject to the sales tax, unless the propane is to be used in the construction, reconstruction, alteration, remodeling, or repair of any building or structure owned by a governmental body or agency or by a tax-exempt organization as defined in I.R.C. § 501(c)(3) and unless the purchaser and the vendor comply with the requirements of Chapter 64H, Section 6(f).

3. Sales of propane to operate forklift trucks are subject to the sales tax, unless the forklift trucks are used directly and exclusively in an industrial plant in the actual manufacture of goods to be sold. 4. If the Company uses any propane itself, that propane is taxable. The amount subject to the sales tax is the cost of the propane used by the Company.

Very truly yours

Ira A. Jackson
Commissioner of Revenue

March 05, 1984
LR 84-10